The government has confirmed in today's Budget that it will align the tax treatment of foreign and domestic schemes.
According to documents published on the Treasury's website, transfers to qualifying recognised overseas pension schemes (QROPS) will be subject to a 25% tax charge from 9 March.
Similarly, the policy will applies to payments out of QROPS and cover the period of five full tax years following the date of transfer, from 6 April.
The measure first announced in last year's Autumn Statement is designed to "support the government's objective of promoting fairness in the tax system", said the Treasury.
It estimates the changes will bring £300m in revenue from 2017-18 to 2021-22 and effect a small number of the 10,000-20,000 transfers to QROPS each year.
Individuals and households with UK pension savings who intend to transfer those pension savings outside the European Economic Area (EEC) to a pension scheme in a country other than their country of residence will be affected by these changes.
Aries Insight director Ian Neale said: "The measure to a considerable extent closes a glaring anomaly that there has been no requirement for a person transferring to a QROP to live in the country where the QROPs is registered. There was no residency test.
"This is an interesting measure to address the lack of a residency test. It is a deterrent to scammers and people who are moving their benefits to take advantages of different pension regimes."
Dentons Pension Management director of technical services Martin Tilley added: "The widening of benefit options and reduction in taxation of death, both pre and post age 75, had already made the transfer of pension savings to QROPS less attractive and these measures should thwart all but the genuine cases of change of domicile."
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